Column

The markets witnessed a lower turnover week as traders displayed caution and the holiday season impaired participation.

The week-on-week market wide turnover on the MCX fell 30% and market wide open interest rose 3%. The MCX turnover gainers during the week were aluminium, cotton, crude palm oil, mentha oil and potato. The open interest gainers were aluminium, cardamom, copper, crude oil, gold, nickel, potato, silver and zinc.

The US non-strategic petroleum reserves were lower by 10 .6 million barrels. The US dollar continued to strengthen against the global basket and that saw safe haven buying ease in bullion.
Being the December expiry week-cum-yearend, I suggest playing on thin exposure as the impact costs and volatility are likely to be higher.

Agri commodities
Mentha oil witnessed a compression in the weekly range as the market players geared up for the prompt month expiry. The inside formation on the weekly bar charts indicates a bigger move in the offing, probably in the first week of the coming month. The outlook remains negative and patient players may sell on rallies. Market internals indicate a 4 % increase in turnover and a 7% decrease in open interest.

Potato has pulled back after a weak spell along advocated lines last week. The rising open interest and turnover imbibe bullish confidence as the upthrust is backed by trader participation. Hold longs for now. Market internals indicate a 140 % rise in turnover and a 9 % rise in open interest.

Sugar M kol has made a bearish engulfing pattern on the weekly candle charts and outlook appears to be under pressure in the near term. The news based triggers seen in the commodity on news of possible export decontrol is adding to the volatility. Fresh buying should be contemplated only after the price closes above the `3,000 mark. Market internals indicate a 31% fall in turnover and a 22% fall in open interest.

Metals
Aluminium has closed with mild losses on a w-o-w basis but has pulled up from the weekly lows. The surge in the US dollar has negatively impacted most industrial commodities but for which, prices would have been higher. Being the expiry week, large fresh build up is unlikely. Market internals indicate a 3% increase in turnover and a 22% increase in open interest.

Copper has gained on a w-o-w basis and the `378 level advocated as a swing support has held up. The weekly candle charts indicate a bullish piercing pattern and that indicates optimism in the near term. Follow up buying above the `408 levels will be needed to take the prices sustain ably higher in the coming week.

Hold longs for now. Market internals indicate a 16% decrease in turnover and a 27% increase in open interest.

Gold has rallied marginally as bears covered shorts and the `26,850 support advocated held up. The coming weeks may see a mild pullback rally as some more short get covered. The `26,850 level remains a support to watch. Market internals indicate a 39% decrease in turnover and a 1% increase in open interest.

Nickel has retraced from the 1,000 mark along advocated lines last week. The metal has rallied faster and higher in relative comparison with its peers and is likely to encounter increasing resistance at the `1,025 - `1,040 band in case of an upthrust. Short term traders must book profits on longs if any at the `1,020 levels in the coming week. Market internals indicate a 21% decrease in turnover and a 12% increase in open interest.

Silver has under performed Gold in absolute term and is showing an inside pattern on the bar charts. A sustained trade below the `52,500 levels can trigger a fresh bout of bearishness which may test the `51,000 levels. Fresh buying is advocated above the `58,000 levels only. Market internals indicate a 36% decrease in turnover and a 12% increase in open interest.

Zinc has closed at its five week low and that too in the face of bullishness within its peers. That is an indicator of potential weakness in the metal in the near term and the possibility of lower levels should not be ruled out. Avoid bargain buying for now. Market internals indicate a 16% decrease in turnover and a 38% increase in open interest.

Energy
Crude Oil has rallied inspite of signs of caution last week as the expected economic recovery, triggered by the US payrolls and home data coupled with a drastic fall of 10.6 million barrels in the US non strategic inventory forced a short squeeze. The chart now has done an about turn and indicated a bullish engulfing pattern, which is sure to cause extreme volatility in prices in the near term. Hold longs for now. Market internals indicate a 24% decrease in turnover and a 30% increase in open interest.

Natural Gas has fallen again, logging the fourth consecutive decline on the weekly charts. The closing is the lowest in 14 months and that underscores the weakness in the undertone. Hold shorts for now with a stop loss at the `171 level. Market internals indicate a 20% decrease in turnover and a 6% decrease in open interest.

The writer is the author of A Traders Guide to Indian Commodity Markets and can be reached at vijay@BSPLindia.com
Fair disclosure: The analyst has no exposure to any of the commodities recommended above